Can we place a second charge on son's property to protect our £40,000 gift?

Submitted by Frances Traynor on Tue 04 Sep 2018

At In-Deed, we are often asked questions by clients on specific aspects of conveyancing, all of which we aim to answer as quickly and as thoroughly as possible. In our regular blog, we'll look in depth at some of the most common questions posed by buyers and sellers, remortgagors and those seeking a transfer of equity.

A recent enquiry covered gifting money to someone to buy a home: "My husband and I are gifting our son £40,000 to assist with a property purchase. We are looking to put a second charge on the property for this amount. What legal work is required for this?"

The experienced property lawyers who work with In-Deed can carry out the necessary legal work to add a second charge to a property.

Lender must agree

A property bought with a mortgage will have a first charge on it in favour of the lender. This means the property cannot be sold or alterations made without the agreement of the holder of the first charge. When the property is sold, the mortgage is repaid and the charge released.

A second charge on a property is often made on a property when the owner takes out a secured loan or a second mortgage, and it can only be done with the agreement of the lender holding the first charge.

Gift could be returned

In this scenario, the parents are gifting £40,000 to their son to help with the purchase, and so are neither creditors nor lenders. But adding a second, private charge can ensure that, if required, that money can be repaid to them when the property comes to be sold and obviously once the mortgage itself has been repaid.

A conveyancing solicitor can complete the forms required by the Land Registry to complete this legal transaction and liaise with the lender to confirm they will allow the second charge to be added.

Deed of Trust may be alternative option

An alternative to adding a second charge to the property would be for these parents to enter into a Deed of Trust with their son. The Deed of Trust effectively outlines the financial interests in the ownership of a property, such as parents who have gifted a deposit but who are not named on the title.

It's best to get impartial legal advice on how best to proceed when a substantial sum of money is involved.